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MILPITAS, CA-Mission West Properties has been under contract to sell 23 acres on McCandless Drive for the past two years now. Carl Berg, a principal with the Cupertino, CA-based REIT tells GlobeSt.com this week that given the economy he now considers the deal a “long shot.”

The property holds an eight-building, 427,000-square-foot development. The unidentified buyer wants to redevelop the property with residential and has been seeking the necessary development approvals to make it happen. The contract price is $76.5 million.

In February, Berg said it was in the process of negotiating a 12-month extension of a buyer’s option to acquire property on McCandless Drive for residential development. The buyer offered to pay $2 million for the extension on top of $10 million it had already spent on development plans and entitlements, he said. Milpitas’ redevelopment director was not available Tuesday for comment.

“We are waiting for their [development] approvals to sign off on the deal and if they do not close they have agreed to turn over all their plans and approvals to us so we would be able to market it more easily,” Berg said on the company’s fourth quarter conference call in February. “It’s very difficult to know if anyone will close in a market like today but they certainly have spent a lot of money and seem very committed to it.”

This week, Berg maintained a similar mindset. “It’s almost gets closed and then there’s some new delay,” he says. “The entitlements are done; not it is something to do with the development permit but in this kind of market who knows; we look at it as a long shot. It’s in our best interest to close the deal and since it’s being held up by the city we keep extending their deadline. Now we’re hoping sometime [in the first quarter] but then every quarter it changes. If the deal doesn’t go through we get [the $2 million].”

Mission West owns and manages through four limited partnerships a portfolio of approximately 8 million square feet in 111 R&D/office buildings in the Silicon Valley. As of the third quarter the company’s vacancy rate was 35.3% , or 2.8 million square feet, which compares to an overall Silicon Valley R&D vacancy of 16.7% or five million square feet, according to BT Commercial. The average asking market rent per square foot is $1.08 per square foot per month.

“Due to the substantial overhang of vacant R&D properties throughout Silicon Valley,” the company states in its quarterly report, “we believe that we are unlikely to see a sustainable recovery in the leasing market for our properties prior to 2012.”

Still, the company appears to be performing as well as could be expected. Net income for the third quarter was approximately $11.2 million, up from $7.9 million in the same 2008 period, while rental revenue increased by 1% to $20.4 million.

Mission West owns a 20.6% stake in its operating partnerships. The Berg Group owns approximately 74% of the total equity interests.

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